Prayas Engineering Limited, Anand V. The CIT-II, Baroda

ITA 820/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0464 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-01-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 820/AHD/2010 ASSESSMENT YEAR :2005-06 PRAYAS ENGINEERING LIMITED, FORMERLY KNOWN AS PRAYAS CASTINGS LTD. ANAND SOJITRA ROAD, VALLABH VIDHYANAGAR 338120 (GUJARAT) V/S . COMMISSIONER OF INCOME TAX-II, BARODA PAN NO. A ABCP5134E (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI M. K. PATEL, A.R. /BY RESPONDENT SHRI D.P. GUPTA, CIT D.R. /DATE OF HEARING 0 7 . 0 1 .201 3 /DATE OF PRONOUNCEMENT 08.03.2013 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT-II, BARODA, DATED 25.01.2010 FOR A.Y. 2005-06. THE SOLE GROUND OF APPEAL IS AGAINST PASSING THE ORDER U/S. 263 BY THE CIT-II, BARODA. 2. IN THIS CASE, THE ORIGINAL ASSESSMENT ORDER WAS PASSED U/S. 143(3) ON 28.12.2007 BY THE ADDITIONAL CIT, RANGE ANAD, ANAND AND FOLLOWING ADDITIONS WERE MADE: ITA NO. 820/AHD/10 A.Y. 05-06 PAGE 2 I. COMPUTER EXPENSES 3,69,071/- II. INTEREST ON ADVANCE 1,66,200/- III. TRAVELING EXPENSES 1,00,596/- IV. ENTERTAINMENT EXPENSES 11,892/- V. COMPUTER EXPENSES BEING CAPITAL IN NATURE 22,300/- THUS, TOTAL ADDITION OF RS. 6,70,059/- WERE MADE BU T LD. CIT-II, BARODA HAD FOUND THIS ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE BECAUSE NO ADJUSTMENT U/S. 145A WAS MADE BY THE A.O . HE GAVE THE REASONABLE OPPORTUNITY OF BEING HEARD ON 23.12.2009 , WHICH WAS REPLIED BY THE APPELLANT, WHICH HAS BEEN CONSIDERED BY THE COM MISSIONER. THE APPELLANT CLAIMED BEFORE THE CIT THAT THIS ASPECT H AD BEEN CONSIDERED BY THE LD. A.O. THE APPELLANT HAD FOLLOWED EXCLUSIVE METH OD OF CENVAT. HE HAD ALREADY GIVEN ALL THE WORKING OF CENVAT AND THERE I S NO IMPACT ON RETURN INCOME, AS SUCH. THEREFORE, THE APPELLANT CHALLENG ED THE PROCEEDING INITIATED U/S.263 AND ALSO RELIED IN CASE OF CIT VS. MUNJAL CASTING, 168 TAXMAN 241 (2008) (P&H) AND REQUESTED TO DROP THE PROCEEDING. HOWEVER, THE CIT WAS NOT CONVINCED, HE HELD THAT THE LD. A.OS. ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THUS, HE SET ASIDE TH E ORDER OF THE LD. A.O. ON THIS ISSUE AND DIRECTED TO PASS THE NECESSARY ORDER AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT VEHEMENTLY ARGUED AND FILED PAPER BOOK. HE FILED A COPY OF SHOW CAUSE LETTER ITA NO. 820/AHD/10 A.Y. 05-06 PAGE 3 DATED 01.10.2007 ISSUED BY THE A.O. IN POINT NO.2, THE FOLLOWING QUERY RAISED BY HIM: 2. PLEASE SUBMIT A DETAILED NOTE AND ALSO EXPLAIN IN PERSON ABOUT THE SALES TAX AND EXCISE-CENVAT ADJUSTMENT MA DE IN THE MEMORANDUM TRADING A/C AND THEIR NET EFFECT ON THE INCOME COMPUTATION. FURTHER, VIDE LETTER DATED 12.11.2007, AGAIN LD. A. O. MADE QUERY IN PARA NO.1, WHICH IS ALSO REPRODUCED AS UNDER: 1. IN RESPONSE TO PARA NO.2 YOU HAVE NOT SUBMITTED DETAILS REGARDING SALES TAX AND EXCISE CENVAT ADJUSTMENT AN D THEIR EFFECT ON INCOME TAX COMPUTATION. THE SAME MAY BE SUBMITTED NOW. THE APPELLANTS REPLY VIDE LETTER DATED 21.11.2007 IN POINT NO.1, WHICH IS ALSO REPRODUCED AS UNDER: 1. WE HAD PREPARED MEMORANDUM OF TRADING ACCOUNT W HICH WAS SUBMITTED ALONG WITH THE TAX AUDIT REPORT VIDE ANNE XURE-A TO CLAUSE 12-B. WE ONCE AGAIN SUBMIT HEREWITH THE COP Y OF THE SAME. MOREOVER, A DETAILED NOTE HAS ALREADY BEEN GIVEN AL ONGWITH THE COMPUTATION OF INCOME. HOWEVER, COPY OF THE SAME I S ONCE AGAIN ENCLOSED HEREWITH, ON PERUSAL OF WHICH YOU WILL OBS ERVE THAT THERE IS NO EFFECT IN THE TOTAL INCOME. AGAIN HE REFERRED THE PAGE NO.12, WHERE ADJUSTMENT OF CENVAT AT RS.6,43,22,084/- HAS BEEN MADE IN COMPUTATION OF IN COME AND A NOTE TO BALANCE SHEET HAD GIVEN AT PAGE NO.13. HE FURTHER RELIED IN CASE OF PRAYAS CASTINGS LTD. FOR A.Y. 2005-06. WHERE CIT(A)-IV, BARODA, HAD ACC EPTED THE ITA NO. 820/AHD/10 A.Y. 05-06 PAGE 4 EXCLUSIVE METHOD OF THE CENVAT AND ALLOWED THE APPE AL IN FAVOUR OF THE ASSESSEE. HE FURTHER RELIED UPON IN CASE OF CIT V. MAX INDIA LTD. [2007] 295 ITR 282, (SC), THE HONBLE APEX COURT HELD THAT WHERE TWO VI EWS ARE POSSIBLE AND A.O. HAS TAKEN ONE VIEW WITH WHICH CIT DOES NOT ACCEPT THE ORDER OF THE A.O. CANNOT TREATED AS AN ERRONEOUS ORDER PREJUDICI AL TO THE REVENUE UNLESS THE VIEW TAKEN BY THE A.O. IS UNSUSTAINABLE IN EYES OF LAW. THUS, HE REQUESTED TO SET ASIDE THE ORDER OF CIT PASSED U/S. 263 OF THE IT ACT. AT THE OUTSET, LD. CIT D.R. RELIED UPON THE ORDER OF THE C IT AND CLAIMED THAT THE APPELLANT HAS TO SHOW THE CENVAT CREDIT AS PER SECT ION 145A OF THE IT ACT ON THE BASIS OF INCLUSIVE METHOD. HE ALSO RELIED IN C ASE OF TARAJAN TEA CO. (P.) LTD. V. CIT [1994] 205 ITR 45 (GAUHATI) AND GEE VEE ENTERPRISES VS. ACIT [1975] 99 ITR 375 (DELHI), WHEREIN THE 263 PROCEEDING HELD VALID. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE A.O. MADE QUERY ON THIS ISSUE TWICE AND IT HAS BEEN REPLIED BY THE APPELLANT EVEN ADJUSTMENT OF 145A HA D BEEN MADE IN COMPUTATION OF INCOME. THERE WAS A DETAILED REMARK IN THE BALANCE SHEET ON THIS ISSUE. WHEN THE APPELLANT FILED THE REPLY ON THIS ISSUE, NO ADDITION HAD BEEN MADE BY THE A.O., AFTER CONSIDERING THE REPLY OF THE APPELLANT. THE LD. CIT HAD AGAIN RAISED THIS ISSUE U/S. 263 OF THE IT ACT WHICH IS TENTAMOUNT TO CHANGE OF THE OPINION WHICH IS NOT PERMITTED AS PER LAW. FURTHER, EXCLUSIVE METHOD ALSO HAD BEEN HELD BY THE HONBLE APEX COURT VALID FOR COMPUTATION OF ADJUSTMENT U/S.145A OF THE IT ACT. THUS, WE ALLOW THE APPEAL OF THE ASSESSEE. ITA NO. 820/AHD/10 A.Y. 05-06 PAGE 5 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 08.03.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;